The Window For Consolidiating Loans Into a Remortgage Is Closing, Get Ahead of the Rates Rise!
The Window For Consolidiating Loans Into a Remortgage Is Closing
, Get Ahead of the Rates Rise!If you've got unsecured debts and own your own home, you may be considering a remortgage in order to reduce your monthly outgoings and consolidate all your debts into one place.The attractive low rates (and even though they are set to go up, they will remain below three per cent for a long time to come) are a big incentive factor for many considering remortgaging. Those credit card debts, running away at 18 per cent, hire purchase agreements that have proven to be more costly than originally thought, all these debts could potentially become more manageable with a remortgage and consolidation. However, as Mervyn King put it bluntly last year 'The nice decade is over'. The era of easy credit, for many, is a thing of the past.One of the things to consider is how much money you have available on your property, also known as equity. For instance, if you've got a brand new mortgage you're not likely to have paid a whole lot off just yet, but if you've been paying your mortgage for 15 years you might have a decent amount of equity which will allow you to consolidate. Another thing you must note is that consolidating your debts with a mortgage means that you will be extending your repayment term, so although interest rates are lower you may pay more back because you're paying interest for a longer period. Work out how much it would cost you to repay your debts normally and then compare that to the actual cost of consolidating over the life of a new mortgage. Don't do what too many of us have done in the last ten years and take a 'manana' attitude to repayment. That's how we got to where we all are now! Banks have pledged to be more responsible lenders. In plain speak this means they have lost a lot of money in the subprime mortgage market around the world and are now profoundly risk averse when it comes to lending, so they will most likely be offering remortgages and consolidations with a great deal more caution than previously.Mortgage lending in the UK has been falling over recent months, with recent figures showing that remortgage and mortgage lending was down by 16 per cent in 2010. This is likely to be a combination of cautious bank lending and a reluctance from Brits to add to their overall borrowing.Borrowers who have plenty of equity and who can afford repayments, have a good credit history and who satisfy the bank's criteria have a good chance of being able to consolidate. However, by extending the size of the mortgage, the amount of risk that the property is being exposed to also increases. Consolidation was so desirable in the noughties because most people believed that they were going to be progressively more and more wealthy.When considering a remortgage, it is vital that you work out a monthly budget and don't take on more debt than you can afford. Remortgage payments should be comfortably affordable, not a huge monthly struggle. And, consider how stable your employment is before you saddle yourself with more mortgage debt.Don't forget to explore other avenues on credit before extending the repayments over a longer time. Speaking to a financial adviser can help here. You may be able to get a more favourable interest rate for an unsecured loan which can be repaid over a shorter term and this may actually save you more money than adding it to your mortgage - you need to look at all of the options before taking action.If you pay off debts using your mortgage it can be a good financial step if done in the right way. The most important thing to remember is that if you consolidate and can't keep up your repayments you could lose your home. Now is the time to do it before interest rates increase, which is inevitable in the near future.